Britestarr Homes Inc. - Ruling 2, April 6, 1993

Ruling 2, April 6, 1993

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

Alleged Violations of Articles 27 and 25 of the Environmental Conservation Law ("ECL")
and Parts 360 and 661 of Title 6 of the Official Compilation of
Codes, Rules and Regulations of the State of New York ("6 NYCRR")

- by -

BRITESTARR HOMES, INC.,
OAK POINT ASSOCIATES,
DAVID NORKIN,
JOHN MATICIC, and
MICHAEL McLOUGHLIN

Respondents

RULINGS OF ADMINISTRATIVE LAW JUDGE

Case # R2-3324-90-11

Proceedings

These rulings address pre-hearing written motions by the Respondents to dismiss the charges set forth in the Department Staff's Amended Complaint in this matter. Respondents filed their motions pursuant to a schedule, later modified, that was set at a pre-hearing conference held in this matter on December 8, 1992. In this enforcement proceeding, the Department Staff alleges that the Respondents committed a series of violations in the construction and operation of a solid waste management facility located on a site known as the Oak Point Railroad Yard in the Bronx, New York. The specific allegations of the complaint will be described and discussed below in the body of these rulings. The Respondents have previously filed answers to the Department Staff's original and amended complaint.

The motion on behalf of the Respondents Britestarr Homes, Inc. ("Britestarr"), Oak Point Associates ("Oak Point"), and David Norkin was filed by their attorney, Jeffrey D. Buss, Esq., of the firm of Smith, Buss & Jacobs, New York City. The motion on behalf of the Respondent John Maticic was made by his attorney, David A. Engel, Esq., of the firm of Harris, Beach & Wilcox, Albany. Richard Rehbock, Esq., New York City, the attorney for the Respondent Michael McLoughlin, did not file a separate motion, but wrote a letter stating he joined in the arguments presented by counsel for the co-Respondents. Respondents submitted their motions on February 19, 1993. On March 11, 1993 John Nehila, Esq., Assistant Regional Attorney, Region 2, Long Island City, submitted a response on behalf of the Department Staff in opposition to Respondents' motions. Mr. Maticic and the Department Staff submitted additional replies on March 22 and March 26, 1993, respectively.

Both motions submitted by Respondents and the Department Staff's brief in opposition were supported by several attached exhibits and/or affidavits. These will be described below where relevant to the discussion on the issues raised by the motions.

Summary Positions of the Parties

The Respondents Britestarr, Oak Point, and Mr. Norkin raise the following main contentions in support of their motion to dismiss the charges:

The Department Staff improperly obtained information about Respondents from the New York City Department of Investigation ("City DOI"), which had obtained the material by subpoena in a criminal grand jury proceeding;

The Department Staff gathered additional evidence against Respondents during improper searches and seizures on the Oak Point site, in violation of Respondents' constitutional rights;

The alleged tidal wetlands violation is contradicted by a Staff inspection report disclosed to Respondents;

The Amended Complaint fails to allege the underlying facts constituting the landfill violations with sufficient specificity and accuracy;

The Department Staff acquiesced in the Respondents' operation of the facility during the period of the alleged violations; and

The Complaint fails to allege sufficient specific facts to support the liability of the individual Respondents.

The Respondent John Maticic moved for dismissal of the charges on some similar grounds in addition to some bases unique to the status of Mr. Maticic as a Respondent. Mr. Maticic' motion makes the following main contentions:

Mr. Maticic was neither an owner nor operator of the landfill or recycling facility at the site, and cannot be held liable for permitting and operational violations at those facilities which apply only to "owners" or "operators" as those terms are defined in the Part 360 regulations;

The Department Staff acquiesced in the Respondents' operation of the facility;

The Respondents' facility was authorized to operate under the transition provisions of Part 360, specifically 360-1.7(a)(2)(iv);

The alleged presence of solid waste at the Britestarr site is not sufficient to characterize the facility as a "landfill" as that term is defined in Part 360;

The alleged tidal wetlands violation, for which Mr. Maticic is not liable in any event, is contradicted by a Staff inspection report disclosed to Respondents;

The Complaint fails to fairly apprise the Respondent John Maticic of the charges against him by failing to allege the violations with reasonable specificity; and

Mr. Maticic cannot be held personally liable in his capacity as an officer of Britestarr or an employee of Oak Point for any violations committed by that corporation or partnership since the Department Staff has not alleged Mr. Maticic personally participated in any such violations.

The Department Staff, in its brief in opposition to the Respondents' motions, responded with the following main arguments:

The Complaint adequately apprises the Respondents of the charges against them;

A motion to dismiss is directed to the sufficiency of the Complaint itself on its face, not to the sufficiency of the underlying evidence; hence the Respondents' claims regarding improperly obtained evidence or alleged contradictory evidence may not be considered in support of their motions;

The Complaint, along with supporting affidavits, answers to interrogatories, and other discovery documents, sets forth a sufficient prima facie case in support of all charges against all Respondents;

The Complaint supports finding the individual Respondents John Maticic and Michael McLoughlin liable for the violations committed by Britestarr and Oak Point as corporate officers responsible for those violations; and

The Department Staff did not engage in improper discovery through third-party subpoenas or improper searches and seizures on the Britestarr site.

DISCUSSION

Motions for Summary Judgment

Although Respondents have called their submittals "motions to dismiss," they are more analagous to motions for summary judgment. These two means to receive an accelerated judgment or decision are closely related. The distinction is largely procedural, as can be seen in an analysis of CPLR 3211 and 3212. A motion for summary judgment is made after issue is joined, while a motion to dismiss is made before the answer is filed. In this proceeding, the parties have filed answers. A decision on a motion for summary judgment is normally a final decision on the merits, while a decision on a motion to dismiss is usually without prejudice to re-instituting the action. Under CPLR 3211(c) the judge may convert a motion to dismiss into one for summary judgment.

The motion for summary judgment must be supported by affidavits and/or documentary evidence which the judge must examine and weigh in reaching his determination. The inquiry thus goes beyond the face of the pleadings. The parties here have submitted such affidavits and documentary evidence in support of their motions. Therefore, these rulings will be on the merits, in consideration of all submitted papers. Any ruling of the ALJ that finally determines part or all of this proceeding is subject to ratification by the Commissioner in his decision pursuant to 6 NYCRR Part 622.

In ruling on a motion for summary judgment, the inquiry must focus on whether there are any material issues of fact that remain unresolved on the papers submitted. As stated by David D. Siegel, in McKinney's CPLR Practice Commentaries (C3212:1, p. 310): "The motion lies in favor of either party when it can establish on paper proof alone that no material issue exists and that the facts as demonstrated mandate judgment in its favor, and when it also appears that the other side in its opposing papers cannot convince the court of the existence of such an issue." The task of the judge is not to resolve issues, but to determine if any material issue exists. If it does, the judge must deny the motion.

Sufficiency of Complaint

Before analyzing the motions for summary judgment, it is necessary to first address the Respondents' claims that the allegations of the Complaint are insufficient on their face. The Respondent John Maticic contends that the "Complaint does not satisfy the notice requirements of due process as it fails to give Respondent John Maticic fair notice of the charges asserted against him." The Britestarr Respondents state that the "amended complaint fails to apprise respondents of the charges against them with sufficient particularity."

The State Administrative Procedure Act ("SAPA") and the Department's enforcement hearing regulations require administrative complaints to "contain a statement of the legal authority and jurisdiction under which the proceeding is to be held; a reference to the particular sections of the statutes and rules involved, where possible; and a short and plain statement of the matters asserted." (SAPA 301[2][c,d]; 6 NYCRR 622.3[a]). The Respondents and Department Staff have both cited the following amplification of these standards, in Block v. Ambach, 73 NY2d 323 (1989):

"In an administrative forum, the charges need only to be reasonably specific, in light of all relevant circumstances, to apprise the party whose rights are being determined of the charges against him and to allow for the preparation of an adequate defense."

The Complaint in this proceeding cites the applicable sections of the ECL and regulations governing solid waste management facilities and tidal wetlands activities. It identifies the individual, corporate and partnership status of the Respondents, and their interrelationships. The Complaint straightforwardly lists the various alleged violations.

It is true, as Respondents assert, that the Complaint charges all the Respondents with having committed all the alleged violations. But there is nothing improper about this; in fact it is entirely consistent with the Staff's stated theory behind the charges. The Department Staff is alleging that the individual Respondents were responsible for all the alleged violations that may have been committed in the name of the corporate or the partnership respondents, Britestarr or Oak Point. Any corporation or partnership can only act through responsible persons, as is further discussed below. The Department Staff, of course, bears the burden of proving these charges, including those alleging individual liability.

The Respondents have not supported their facile claims that the Complaint does not sufficiently apprise them of the underlying facts constituting the violations. The complaint in an administrative proceeding, or, for that matter, in any legal action, is not a substitute for the evidence that will be received at the hearing or trial. The Complaint need only fairly apprise the respondents of the charges against them. The Complaint here provides a short and plain statement of the charges, in a more than adequate factual context, including dates and physical descriptions of the subject facility and site. The Complaint more than adequately places the Respondents on notice of the charges against them so as to be able to defend themselves in this proceeding. Respondents have not demonstrated any inability to defend against the charges. Therefore, the Respondents' motion to dismiss or for summary judgment is denied on this ground

Existence of Material Issues

The Respondents' contentions must each be examined in light of the standard for granting summary judgment, i.e., whether the submittals demonstrate there is no adjudicable material issue of fact or law.

- Tidal Wetlands Violation

Respondents cite an alleged discrepancy or apparent contradictions in the discovery materials obtained from Staff in support of their motion to dismiss the alleged tidal wetlands violation. An inspection report indicates no such violation was observed on that date. However, an affidavit submitted by another Staff inspector states that the violation involves a different location on the site. There is a factual issue delineated over the location and existence of the alleged tidal wetlands violation. The dates of the inspections as they relate to the potential liability of the Respondents comprise one aspect of the factual issue for which the Staff bears the burden of proof. Therefore this charge cannot be dismissed and it is reserved for the hearing.

- Landfill Violations

The same reasoning and ruling applies to some apparent discrepancies cited by the Respondents in the Staff's responses to the amount of illegal fill allegedly deposited on the site. Respondents also cite another Staff inspection report and a "notice of technical completeness" allegedly indicating no violations at the facility. Respondents further claim their activities at the site did not constitute "intentionally" creating a "landfill" as those terms are used and defined in the regulations. All these matters create factual issues that are reserved for adjudication. To the extent legal interpretations of the language of the regulations may be relevant to these issues, they may of course be raised again in post-hearing argument or briefs.

- Individual Respondents' Liability

Respondents, particularly Mr. Maticic, contend that the Complaint fails to support a theory of his individual liability. There is no question that David Norkin was the person with the most authority and control over Britestarr and Oak Point. Mr. Maticic argues that he was neither an "owner" or "operator" of the subject facility, and that he cannot be held liable as an officer or employee of the corporation Britestarr or the partnership Oak Point.

It is irrelevant that Mr. Maticic is not an owner or operator of the facility or site. The Department Staff is not alleging that he or any other individual acted in such a capacity. Staff is alleging that Messrs. Norkin, Maticic and McLoughlin were all responsible for oversight, management and control of operations at the site in their capacities as officers and/or high-ranking employees of Britestarr and Oak Point (see Amended Complaint 12-14).

The parties are in essential agreement over the legal concept of the "responsible corporate officer" doctrine. The Complaint on its face alleges that the three individual Respondents are such responsible corporate officers. Neither the affidavit of Mr. Maticic nor any other document submitted with the motions demonstrates that there is no issue of fact concerning Mr. Maticic' or the other individual Respondents' liability. To the contrary, such liability is shown by the submittals to be a factual issue that must be determined at the hearing, in the context of the legal basis for corporate officer and employee liability.

- Landfill Permitting Violation

Respondents contend that the charges alleging operation of a landfill without a permit should be dismissed due to the Department Staff's acquiescence in the Britestarr operation. There is no dispute that Britestarr timely sent and Staff acknowledged receipt of a solid waste management facility notification letter pursuant to the transition provisions of the revised Part 360 regulations, specifically 360-1.7(a)(2)(iv). In that letter Mr. Norkin characterized the facility as a recyclables handling and recovery facility.

However, the Department Staff is not charging the Respondents with operating a recyclables facility without a permit in this proceeding. The charge of a permit violation is limited to an alleged landfill at the site after December 31, 1988, the effective date of the revised regulations. Whether the facility meets the definition of landfill will, as discussed above, be one of the issues for hearing. The other allegations all relate to the operational and closure requirements for landfills and recyclables handling facilities. There is no question that the facility would be subject to those standards under the facts as alleged in the Complaint.

The Staff's acknowledgment of the letter and its subsequent processing of Britestarr's application cannot be construed as approval of the operation or a finding that the facility was in compliance with applicable standards. The acknowledgment letter itself explicitly states that the applicant must still comply with the applicable Part 360 requirements. Whether the Respondents operated a landfill without a permit and committed the alleged operational and closure violations for landfills and recycling facilities will be issues for hearing.

Alleged Improper Evidence

The Britestarr Respondents allege that the Department Staff obtained certain evidence improperly through the use of subpoenas to non-parties and from the New York City Department of Investigation without notice to Respondents. Respondents also claim that Staff obtained evidence through unconstitutional searches and seizures on the Oak Point site. Respondents became aware of the subject materials upon Staff's disclosure of them during discovery in this proceeding. The Britestarr Respondents seek dismissal of the Complaint as the remedy for these purported transgressions by Staff, on the basis that they have fundamentally tainted the entire proceeding.

The Respondents premise that these alleged unconstitutional actions by Staff have fundamentally tainted this proceeding is highly questionable. If some material or evidence was obtained improperly, Respondents could move to have it suppressed or object to its introduction at hearing. Dismissal of the entire proceeding is an overly broad remedy. Nevertheless, the Respondents' contentions are considered and determined in these rulings in order to avoid relitigating them at hearing.

- Materials Obtained from the City of New York DOI

Respondents object to the Department Staff's having obtained material, largely consisting of bank records, from the New York City Department of Investigation ("DOI"). The City had obtained this material by subpoena during its criminal investigation of Respondents. Other than saying it is "fundamentally unfair" Respondents do not cite any authority for their contention that this material cannot be obtained and used by the Department Staff in this civil proceeding. Staff obtained it through normal cooperation between two government agencies. Any secrecy interest in the material, as indicated on the face of the original subpoena, is intended only to protect the integrity of the criminal investigation, not the rights of the bank depositors (the Respondents), who have no privacy interest in the bank records. This material is not privileged and was not obtained improperly by Department Staff. Staff has made full disclosure of it in this proceeding. It may be offered and received as evidence at hearing provided it is not found to be otherwise objectionable.

- Materials Obtained by Subpoenas to Non-Parties

Respondents next object to Staff's use of certain material, primarily environmental consultants' analyses and reports of testing of site conditions. Staff obtained this material by direct subpoenas served on the consultants without giving contemporaneous notice to Respondents. In this manner the Department Staff used the subpoena duces tecum as a substitute for a notice to produce documents and things under CPLR 3120(b). In this enforcement hearing, discovery and the use of subpoenas must be consistent with the CPLR (6 NYCRR 622.8).

CPLR 3120(b) requires discovery against a non-party to be by court order on a motion with notice to all parties. While no such explicit notice requirement appears for subpoenas (see CPLR 2302), the better practice is to notify all parties in a pending proceeding.

However the Department Staff did not act improperly or contrary to proper procedure in this case. Staff had previously subpoenaed the same materials, the reports of the non-party consultants, directly from Respondents, who had not fully complied. Further, Staff's attorney had later written to Respondents' former attorney to again demand disclosure of the materials. The Respondents thus had full actual notice that the Department Staff was seeking these materials, before Staff subpoenaed them directly from the consultants. In addition, the material was promptly fully disclosed in turn by Staff to the Respondents. The case cited by Respondents Matter of Beiny, 129 AD2d 126, 517 NY 2d 474 (1987) involves the use of a non-party subpoena as a subterfuge to obtain privileged matter, and is not applicable to the facts in this proceeding. Therefore any material obtained by subpoena to the non-party consultants may be offered and received at the hearing in this matter if it is not otherwise objectionable.

- Material Obtained by Searches of the Site

The Britestarr Respondents claim that the Department Staff conducted several improper searches of the Oak Point site and obtained evidence and photographs in violation of Respondents' Fourth Amendment right to be free from unreasonable searches and seizures. During the period from early 1989 through 1992, Staff members visited the site a number of times -- sometimes in the presence of or with notice to Respondents and other times without notice or the Respondents' consent. It is undisputed that Staff's inspections all occurred during normal business hours and that the site was unsecured and unoccupied during the inspections without notice to Respondents.

In these circumstances, Staff's inspections of the site were in full compliance with the Fourth Amendment and, more specifically, 6 NYCRR 360-1.4(b). That subdivision allows Department Staff to "enter and inspect a solid waste management facility . . . at all reasonable times, locations, and hours, whether announced or unannounced, for the purpose of ascertaining compliance or noncompliance with a permit, the ECL, and this Title." The Respondents had no legitimate expectation of privacy from Department Staff inspections at the site in this manner during this period. Therefore any evidence obtained by Staff during any visit to the Oak Point site may be offered and received at the hearing in this matter if it is not otherwise objectionable.

Conclusion

The Respondents' motions for dismissal of the charges or for summary judgment are denied in all respects. There will also be no suppression of any evidence obtained by Staff on the basis of any of the grounds alleged in Respondents' motions.

The hearing remains scheduled to begin at 10:30 A.M. on April 13, 1993 in the Department's Region 2 Office, 47-40 21st Street, Long Island City, New York. It is scheduled to continue on the following two days, April 14 and 15, 1993.